Restructure This! Podcast Ep. 3
Canada: Cannabis Boom or Bust?
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Canada legalized recreational cannabis in 2018, but the legal cannabis market continues to struggle even three years later. Observers blame overregulation by both federal and provincial regimes, high taxation, and a thriving black market that continues to sell cannabis at much lower prices. What has this meant for cannabis bankruptcies in Canada, and what lessons can the U.S. learn? We speak with Kathryn Esaw, partner in the Insolvency and Restructuring group at Osler, Hoskin & Harcourt LLP, and Susan Newell, partner in Osler’s Health Industry and Cannabis groups.
Guests:
Kathryn’s practice focuses on proceedings under the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act throughout Canada. She has represented debtors, court officers, creditors, purchasers and lenders. Kathryn also has experience in restructurings under the Canada Business Corporations Act.
Susan provides strategic advice to health industry stakeholders in connection with mergers and acquisitions, healthcare corporate restructurings and integrations, corporate governance matters, shareholders agreements, commercial agreements, outsourcing, clinical trial agreements and regulatory opinions in connection with federal and provincial health and cannabis statutes. Susan regularly advises cannabis license holders and other industry participants with managing Canadian commercial operations within the cannabis regulatory environment, including licensing, supply agreements and promotional and advertising activities.
Transcript:
Justin Bernbrock:
On today's installment of Restructure This, we welcome Kathryn Esaw and Susan Newell of the law firm, Osler, Hoskin & Harcourt located in Canada. Kathryn is a partner in Osler's insolvency and restructuring group, focusing on proceedings under Canada's bankruptcy and insolvency act and the company's predator's arrangement act. Susan is a partner in Osler's health industry and cannabis groups and advises cannabis companies on how to navigate Canadian law that governs cannabis operations.
Justin Bernbrock:
The two of them explain to us why the cannabis industry in Canada hasn't taken off even three years after the federal law legalized recreational use and how U.S. companies might take advantage of the lessons learned in Canada. As always stay tuned after the interview for a quick rundown of current restructuring news and notable stories.
Justin Bernbrock:
All right, we're back with another episode of Restructure This. Very, very excited today to welcome Kathryn Esaw and Susan Newell from Osler, Hoskin & Harcourt. Katherine, Susan, welcome.
Susan Newell:
Thank you so much for having us.
Kathryn Esaw:
Hey Justin. Thanks.
Justin Bernbrock:
Absolutely. Well, I think it would be helpful for everyone if we heard from each of you, just your background, your practice, and how you came to getting involved in cannabis in Canada.
Kathryn Esaw:
Thanks Justin. So as you mentioned, I'm a partner in the insolvency and restructuring group at Osler. I'm located in Toronto, but Osler has offices across the country in Montreal, Calgary and DC. We also have an extension office out in New York where we’ve got a couple lawyers there practicing law. I've been involved in insolvency since day one. I clerked for some bankruptcy judges and really liked the work and got into it from there. So I've always been at a full service firm.
Kathryn Esaw:
So I've been here for about two years now as a partner, and the group does a lot of large files. So our chapter 11 equivalent is the CCAA. We do a ton of CCAA work for debtors, bondholders, other sorts of creditors, purchasers and court officers—who you'll hear more about the court officers as we talk about cannabis insolvencies. I'm very fortunate; Osler's got one of the most well regarded restructuring practices in Canada. So we see a ton of large files and we do a ton of cross-border work, including with respect to cross border cannabis companies.
Justin Bernbrock:
That's great. Thank you, Kathryn. And Susan, how about you?
Susan Newell:
Thanks so much, Justin. So I'm a partner in our health industry group here at Osler and our health industry group and our cannabis group are located in the same place, which might not make intuitive sense right off the bat, but it actually does make a ton of sense because of the way that the legislation evolved our cannabis—and we'll get into this in greater detail later on— but regulated at the federal level as well as the provincial level. And a lot of the legislation is very similar to the way that we regulate tobacco and also pharmaceutical drugs. So borrows very heavily from those same concepts. And of course is regulated by Health Canada, which is our federal health regulator here in Canada.
Susan Newell:
My career is a little bit different than Kathryn. I didn't know what I wanted to do right off the bat. I started in securities law, which actually ends up being extremely helpful when I practice now because I have a really good understanding of corporate M&A transactions that I might not have otherwise had, had I started in health my whole life. But I've been practicing in the health industry here for many years now. And Osler is very unique in the Canadian market. Unlike the U.S., where health regulatory lawyers are a very common thing you'll see in law firms, here in Canada, many of our major international and national firms do not have a dedicated Canadian health industry group.
Susan Newell:
And there's a variety of reasons for that, the main one being Canada was historically seen as socialist, not really a large enough market, provincially regulated. The health industry is heavily influenced and control rests with the regulated health professional. So up until the last several years, there wasn't a lot of corporate commercial activity in the health industry. And as a result, many firms do not have a health industry group similar to the one that we have at Osler, which is fairly robust. And we're very well positioned to advise on corporate commercial matters in the health industry, including in the cannabis industry.
Susan Newell:
So we've been doing cannabis regulatory work from before the Cannabis Act came into force back when it was regulated under a regulation under our Controlled Drugs and Substances Act. And so we really had the luxury of seeing it evolve and change and being involved in the cannabis regulatory side of things from day one. And that's pretty much everything I think is relevant.
Justin Bernbrock:
No, it's really great and very much appreciate getting your respective perspectives. So, and I think Susan, you alluded to this, but just for everyone's benefit and to level set: Canada, just after Uruguay was the second country to legalize cannabis at a federal level. I think it was in October of 2018. Susan, you mentioned the Cannabis Act. Can you describe in more detail the contours of that Act, how it came to be? I think particularly in the United States, there are a lot of eyes and ears focused on this at the federal level. And so hearing a bit about that process in the first instance, I think would be very helpful.
Susan Newell:
So how that Act came to be and what the main stated objectives were of that legislation when it was being adopted is the government decided that there would be a number of specific goals with the legislation. And in particular, that was to prevent young persons from accessing cannabis. And when we say young persons in Canada and under the Cannabis Act, we mean people under the age of 18 years old. And then the second identified stated objective was to protect public health and public safety by establishing strict product safety and quality requirements for cannabis. And the next identified objective is to deter criminal activity by imposing serious criminal penalties for those operating outside of the legal framework, as well as to reduce the burden on the criminal justice system in relation to cannabis. And then it's not an official stated objective that was included with the legislation, but an additional consideration that was influential in having this Act adopted was the goal of diverting revenue from the illegal cannabis market, entering that into a legal taxed source of revenue.
Justin Bernbrock:
So in the U.S., as you know, under federal law, cannabis is still banned or illegal, but several of the states have legalized cannabis for both medical and recreational use. I'm curious, given the federal and provincial system in Canada, how do the two interact and what have you observed, Susan, in that respect that perhaps can be instructive or informative in the U.S.?
Susan Newell:
Yeah, so we're very lucky compared to the U.S. cannabis lawyers, because it's a lot simpler for us here; there is very clearly identified what's under the federal jurisdiction. And then in the Cannabis Act, it also includes specific references to what will be covered by the provincial legislation, and then our provincial legislation and our municipal legislation—everybody has their lane. With that said, the way it works here in Canada is the two do work together. So it is permissible. And we see this in a variety of instances where a province or a municipality can take a more restrictive view than what is permitted under the federal act, but in our system, it can't be the case. It's not the case that any of our provinces—provinces being the same as your states—would be able to introduce something that's more permissive than the federal Act.
Justin Bernbrock:
Have you seen, Susan, any instances where the differing regulations or regimes at the provincial or municipal level have actually hindered or stunted economic activity? Or do those regimes stick to where you can do it, who can do it, what you can do it with? Because I can envision a scenario where trying to navigate a complicated web of mismatched economic policy would hinder a company.
Susan Newell:
Yeah, absolutely. It's interesting because what's governed at the provincial level is not the same as what would be impacted on the licensed producer side. So if I'm a cannabis company growing, producing cannabis, none of what in my view—and the cannabis company may take a different view from a more nuanced perspective, but—there's no real significant difference between the provinces that I see in connection with how they've adopted the various restrictions. The wholesale and distribution is probably the one element that's regulated at the provincial level that's more likely to have an impact on the financial or economic interest, because that sets out who can participate in the wholesale and distribution. With the exception of one province, all provinces determined that the province has exclusive jurisdiction on doing that activity. So there's no private wholesale and distribution across the board. I think that would be one where there would be more significant restrictions.
Susan Newell:
The one thing I will say though, that does have a more of an impact, I would expect, from an economic perspective is having an interest in the retail stores with the federally licensed cannabis company. So what I mean by that is, there's restrictions under provincial legislation in certain provinces and they're not identical. Let's say, if you're a cannabis license holder, you can't also own a retail store because they're trying to avoid the vertical integration with the exception of having one store onsite at the license producer or the cannabis license holders’ onsite location. But the goal being that the legislation is attempting to prohibit true vertical integration, whereby a licensed producer grows, processes and then directly sells to the retail public through a variety of retail stores, franchise arrangement, or otherwise. And so there's licensed producers that are permitted to hold a certain percentage of ownership interest only in the retail stores.
Susan Newell:
And so province by province, that's one that would be likely to have a greater impact on the economic considerations. But I would say otherwise, the provinces are fairly aligned in how they've adopted their provincial legislation. And every time we get a question about, "Can a cultivator do this? Can we do this with our marketing in this jurisdiction? What can be in a retail store?" We always go, of course, to check and confirm all the different provincial acts, but you'll see similarities there; generally speaking they're adopted in a similar way.
Justin Bernbrock:
That's helpful and interesting. So shifting gears a bit, I think I've heard it referred to as the “green rush,” where businesses and investors have really dived into the cannabis industry. And now as you mentioned, we just passed the three year anniversary of the Cannabis Act, but not all these companies are doing so well. In fact, based on my pretty limited understanding, few, if any, are actually cash flow positive. And so a lot of excitement, a lot of positive legislation, not a lot of return for investors. So what's going on?
Susan Newell:
Yeah, so I think there's a variety of reasons that contribute to what you're describing, that phenomenon, the first of which is the illicit market, and that's one that is very difficult to ignore. It is the case in Canada that there remains a relatively thriving illicit market for cannabis, notwithstanding that it is legal and there are legal sources to obtain cannabis for recreational or adult use. And so that makes it very difficult for the legal companies—the companies that are operating in compliance with law, in compliance with all of the restrictions, product quality, following all the rules, doing everything properly, charging tax on their product—their products are naturally going to be more expensive based on all of those factors than perhaps an operation that doesn't have such robust obligations that they're required to comply with because they're operating legally.
Susan Newell:
And then we do have in Canada—it is very easy to access the illegal market still—retail shops that are open in broad daylight now. There was a huge period of time where we would see in the newspapers, they’d report, the illegal shops would be open, and then the police would go and put locks outside or lock the doors. And then two weeks later, the shop would be open again. And so that's a huge contributing factor, in my view, that really can't be ignored.
Susan Newell:
And then from there, we've got a variety of other factors that are also quite relevant. And I think the first of which we talked about a little bit before was about the provincial distribution. Distribution is very heavily regulated and vertical integration is not possible because you've got the government sitting in the middle there when we're talking about retail sales. The exception to that is that the licensed producers—the federal license holders—can sell if they hold a sales license; they can sell cannabis for medical use directly to Canadians who have a medical document to obtain cannabis. But that is becoming more and more not the norm because why would I go obtain a medical document for cannabis if I could just walk into a store and buy cannabis?
Susan Newell:
So as a result, you've got the government sitting there in the middle of this distribution chain. And so that impacts the ability to take advantage of some of those synergies that might otherwise be there. The next thing is simply an over optimistic view of the industry and a crowded industry. And so it was a very exciting time leading up to 2018 and even after 2018. All sorts of people were coming out of the woodwork because cannabis seemed to be a really exciting and potentially very, very lucrative industry. So we saw a huge flood to the market. And the reality is, many of those industry participants may not have been appropriately positioned to thrive.
Susan Newell:
Another interesting nuance to our system is the difficulty in differentiating products and developing brand recognition. That's a huge problem, in my view, that the cannabis industry is facing. It is very challenging based on our promotional restrictions here in Canada, for cannabis participants to really differentiate your product and get their name out there and develop a brand loyalty and a following because of the very, very robust restrictions we have on promotional activity. And that's one of the factors that are regulated at the federal level.
Susan Newell:
Essentially what the Cannabis Act provides is a broad prohibition on any promotional activity whatsoever. So anything a cannabis company does—or media organization or relating to a cannabis product, cannabis itself, or an accessory, any representation for the purpose of selling other than a representation on a package or label—that's about the thing or service, whether directly or indirectly that's likely to influence or shape attitudes, beliefs, and behaviors about the thing or service, is prohibited.
Susan Newell:
And so that's a very broad definition and very difficult as a result for cannabis companies to get their name out there, get their product out there and have people follow them and choose their product over another product. So that's been a struggle. There are of course exceptions, limited exceptions from that overarching promotional prohibition, but generally it's a challenge for many to do promotional activity. And as a result, I think that's been something that's been challenging because I think many believed that it would be possible to make a better product—I’ll have a better product and differentiate myself that way. And that is a difficult approach for many because the cost might be more. And again, we're getting into the illicit market competition and the inability to advertise, promote and set yourself apart from the competitors has been a challenge for many.
Susan Newell:
And then the geographic limitations of importing and exporting cannabis, because it is only permissible to export and import cannabis for medical or scientific purposes, which means that we've got a captive market on the recreational use side of cannabis, because we are not shipping cannabis for recreational use to countries outside of Canada, because it's not permitted. And even on the medical and scientific side, when importing or exporting cannabis in order to export cannabis, every single export shipment needs an export permit. So it's not a very easy system to navigate and export in bulk, even for medical purposes to other countries that might have a regime that permits cannabis for medical purposes.
Susan Newell:
Those are the main factors I would say, a combination and mix up of all of those are certainly going to be relevant to a greater or lesser degree, depending on the particular organization.
Justin Bernbrock:
And it's interesting, I hadn't appreciated the prohibition or limitation on vertical integration and how that interplays with the restrictions on branding and marketing. Can see how that would make it almost doubly difficult for cannabis companies to really get significant market share.
Justin Bernbrock:
So, Kathryn, let's talk about some of the restructuring activity that you've seen in Canada, and I think it's difficult in 2022 to talk about things over the last couple of years, without reference to the onset of the COVID-19 pandemic. But certainly some companies come to mind initially, CannTrust Holdings, Wagner Cultivation Corp. What did 2020 look like in terms of restructuring or distressed activity in Canada, from your perspective?
Kathryn Esaw:
Yeah, that's a great question. And picking up on something Susan said earlier, I'll note a few things. So in respect to her comments about the optimism of the market, I find it a very interesting statistic that when cannabis was legalized, which as Susan mentioned, was October 2018, the market cap of Canada's 10 largest public cannabis companies was about $60 billion. And a year later, that had gone down to $25 billion. So there's a lot of people feeling very optimistic, and then a lot of people crash down to reality. And 2020 was more of that same decline. So we saw lots happening.
Kathryn Esaw:
And to your point, Justin, I actually don't know how much COVID genuinely impacted a cannabis company restructuring. I think it's where a cannabis company was having trouble. And then they saw COVID happening, it was a convenient time to dip in. But my understanding, and Susan correct me if I'm wrong, is that cannabis sales have been up during COVID, as people stay home and struggle to deal with the mental strain of working from home and raising children at home and all that. We've had a lot more severe lockdowns in Canada than in the U.S. Specifically in 2020.
Susan Newell:
On that note, Kathryn, I just wanted to add that you're right, there was a Canadian cannabis survey conducted in 2020, and it'd be interesting to see how that may have changed or evolved in 2021. But there was an increase in the percentage of Canadians that identified legal storefronts as their source of cannabis, comparatively to pre-COVID when they may have obtained that from people outside one's household or other sources and friends. And so we don't know whether that people are now using the legal stores because that's what they want to do, or if it's just because they're not around their friends and acquaintances or dealers that they used to access pre-COVID. So it'll be interesting to see post-COVID if that start remains as high as it is, or if it continues to increase the shift from legal to illegal sources because of the public.
Kathryn Esaw:
And again, as Susan said, in 2019, we had a few cannabis restructuring, so we can get into numbers a little bit later. 2020, we had a lot more. I think part of it is natural business cycles. Everyone was flooding the market at once, there were of course going to be people who didn't survive for various reasons, in part, like a lot of the reasons that Susan had mentioned earlier. But we got a crash course in how to restructure a cannabis company. We dealt with a lot of issues about license transfers, which were a huge question leading into the legalization of cannabis on the restructuring side. As Susan mentioned, if you hold a license, you can't just transfer the assets or that license willy nilly; you need regulatory approvals. They can take forever. The government has a ton of discretion into whether or not they approve a license around what timeline.
Kathryn Esaw:
So 2020, we figured out how that works. I'm happy to get into that. We learned a lot about the importance of key employee retention plans in a cannabis company. Again, because of the licensing requirements, there are certain people you need to be at the company in order to continue on with your production. . .during your restructuring process. So we see KERPS are common, not huge dollar values, but a lot of people, the critical employees, are getting key employer retention plans and courts have recognized that's important. Court officer liability is a huge issue, a huge consideration for people. Every restructuring proceeding in Canada, new a court officer, even a chapter 11 equivalent CCAA.
Kathryn Esaw:
And there's a lot of concern about the monitor or the receiver or the trustee not being found to have taken possession of the cannabis, because there are criminal sanctions associated with that. And our monitors are, the big four accounting firms and the FTIs and the Alvarez & Marsals, companies that do not want to be tainted in any way with any sort of criminal allegation. So we figured that out, and that was actually dealt with pretty easily through just having a court order that at no point shall the court officer be deemed to have taken possession of anything.
Kathryn Esaw:
Interim financing: I actually thought was very interesting. Justin, to your point about COVID, there are still people willing to lend money to cannabis companies. I actually think there are probably a lot of cannabis companies that are functionally insolvent but have not had to file because there are people willing to give them money at really favorable terms for what their debt profile or their risk profile is.
Kathryn Esaw:
So we were curious to see a lot of the companies needed interim financing, because they were just not profitable. And there were in some instances competitions where existing secured lenders and new lenders were willing to come in and make offers to be interim financing sources, which blows my mind. A lot of the cannabis DIPs are under market, just because a lot of time it's a pre-existing lender who wants to make sure they retain control over the process. So I've been involved in more DIP fights on my cannabis files than in any other industry I've done.
Kathryn Esaw:
And then taking it back a little bit more generally, in 2020, we learned a lot about how to properly format our restructuring proceedings. So in Canada, I think similar to the U.S., there are a number of different ways you can restructure a company. There are four primary ways in Canada. So the first one is the Company's Creditors Arrangement Act. It's a restructuring statute meant to facilitate a going concern solution to a business. Management stays on, there is a court officer watching over things, but the debtor remains in possession of its assets. We have proposals which are many CCAAs, they're meant to be similar to the CCAA, but quicker and less expensive. And for smaller companies that don't have the complexity of a larger corporate restructuring.
Kathryn Esaw:
Then we have receivership proceedings, which are different than the state receiverships that you guys have. It's a national concept where someone will come in, a court officer or a receiver, and actually take possession of the business and have the option to keep operations going, Management's out, but someone is continuing to operate the business for hopefully a going concern. And then there's a pure bankruptcy where someone walks in and takes the keys and turns the lights off and everybody liquidates.
Kathryn Esaw:
So we had found that the most efficient way to restructure an operating cannabis company is through the CCAA restructuring proceedings, just because management stays in place, the key employees that are needed in order for the licenses to stay valid are still there. And Health Canada, which regulates all the licenses, has not had a problem with any of that happening. So a lot of cannabis restructurings are done through the CCAA. There are of course, other ways, like I think we're going to talk about later, which was a receivership involved in a cross border proceeding.
Kathryn Esaw:
And then the last big thing we learned in 2020, which I think would be of interest to you guys, is how to deal with cannabis companies that have operations in the U.S., but maybe a topco in Canada and how to take advantage of the Canadian insolvency legislation to make sure that an American company can get at least partially restructured.
Justin Bernbrock:
I think most people know something of a wrinkle in the U.S. system because the federal system still bans cannabis. And because it is the federal system that has enacted the Bankruptcy Code, cannabis companies in the United States, thus far, have been ineligible for chapter 11 protection. And so they've sought state-based remedies. And of course, given the federal legislation in Canada, you've seen, as you mentioned, cannabis companies availing themselves of the federal protections in that regard.
Justin Bernbrock:
And so I think it'd be interesting to hear how many, what are the sort of profiles, why are these companies winding up in a formal insolvency proceeding? And then I think if there's any in particular, especially that have this U.S. component, Kathryn, that you want to explain a bit more about, I think that would be very interesting.
Kathryn Esaw:
I can think of about at least half a dozen Canadian cannabis and insolvency proceedings that have had an American component to them. I don't know if it was just fate or something beautiful like that, but a lot of the time cannabis companies with a U.S. operations space that wanted to become publicly traded were able to find empty Canadian mining shell companies that were just sitting around waiting to be the subject of a reverse takeover. And they were American operations, they incorporated a public Canadian holdco that holds the shares, and that's the vehicle by which people were able to invest in these American companies—what functionally are American companies. So DionyMed is a very good example of how Canadian proceedings can help out Americans.
Kathryn Esaw:
Another one is Wayland, which I was involved in at my old shop, and my new shop also worked on that file. And Wayland had some international assets including in the U.S., and we were ultimately able to deal with that. Again, the American assets weren't actually really a problem in that case, but through a reverse vesting order, similar to a share deal, but a little bit more sophisticated and easier to deal with on a going concern basis, we were able to reverse out all the liabilities from Wayland that the buyer didn't want to take, again, just from the Canadian entities, and give the buyer the cleaner version of the Wayland company that was stripped out of liabilities, at least the Canadian company, which made it more competitive and more viable.
Kathryn Esaw:
So there are lots of ways to come in if you are a distressed company in the U.S. and have some sort of connection to Canada. There are opportunities here for you to restructure. Until the day I'm sure inevitably it becomes legal in the U.S.
Justin Bernbrock:
Well, it's anyone's guess when that may actually pass. Congress is a difficult place these days.
Kathryn Esaw:
Fair enough.
Justin Bernbrock:
So Kathryn, it has been, at least from my perspective and I think a lot of others, a pretty slow period in restructuring activity, called it in the last six months or so. We've got U.S. bankruptcy lawyers starting podcasts, never know what's next in light of how little restructuring activity is actually happening, but what do you see, Kathryn, as you look down the road for cannabis companies in particular in Canada? I mean, are there opportunities for U.S. investors? Are there opportunities for others as you try to predict what might happen over the next 12 months or so?
Kathryn Esaw:
I'm always so optimistic that the end of the world is coming and then it doesn't, but in cannabis, in particular. So like in 2019, there were about five Canadian cannabis insolvency proceedings. And then in 2020, it rocketed up to, I think there were about 15. 2021, as far as I can tell, we don't have the same centralized tracking system as you guys do, but as far as I can tell, there's been about 10. So we're slightly down on cannabis files. And I will say in 2021, the most common industry for restructuring in Canada was construction, not cannabis.
Kathryn Esaw:
So I think there's still a lot of distress cannabis companies out there. We keep our eyes on the ones that we think are particularly in trouble. But I think with the same as any industry right now, there's lots of money, debt’s cheap. And companies that in my mind maybe should be filing are able to keep limping along.
Kathryn Esaw:
So in respect, I think any insights I have in cannabis are similar to my insights to restructuring generally in that I think there are going to be more cannabis restructurings this year than there were last year, but at least in Canada, restructurings were near historic lows last year. So it can only go up from here.
Justin Bernbrock:
Yeah, I think that's right. I said to friends before, "One is always greater than zero." Well, this has been really, really enlightening. And I thank you both for the time. What I've started doing on this podcast for better term, it's sort of a calling card idea, and I'll ask each of you in turn: So Kathryn, if you were not a Canadian restructuring lawyer, what would you be? And you can answer that as broadly, assuming no limitations, no restrictions. And then Susan we’ll get your answer as well.
Kathryn Esaw:
My answer is so boring. I'd probably be an American restructuring lawyer.
Justin Bernbrock:
We're happy to have you.
Kathryn Esaw:
Thank you. No, I mean, I think the restructuring market is very cool. So I do look at you guys with some envy on some deals you guys do.
Justin Bernbrock:
Susan, how about you?
Susan Newell:
I would be a ski instructor.
Justin Bernbrock:
That's exciting.
Kathryn Esaw:
Oh, you're so much cooler than me.
Susan Newell:
But I'm still a very academic and intellectual person, Justin. So, that's what I would do.
Kathryn Esaw:
Sounds wonderful.
Justin Bernbrock:
Well, thank you. Thank you both so very much. I've enjoyed this time and certainly I've enjoyed our longer relationship and look forward to working with you all in the future.
Susan Newell:
Thanks so much. And thanks for giving us the opportunity to speak today. We're really grateful.
Kathryn Esaw:
It was great chatting again. Thanks Justin.
Justin Bernbrock:
Yep. Our pleasure.
Catherine Jun:
This is Catherine Jun for Sheppard Mullin's Restructure This. In current restructuring news, the fate remains undetermined for Basic Energy Services’ chapter 11 cases. A hearing in the Texas case was continued this week on the newest trustee's motion to convert or dismiss the case. A May 1st deadline has also been set for the debtors to either file their plan and DS or further extend their exclusivity or seek conversion or dismissal of their chapter 11 cases.
Catherine Jun:
This is the latest in the many twists and turns since the energy company filed its chapter 11 in August of last year in the Southern District of Texas. Before this, the debtors had previously filed its own request to dismiss the cases, then withdrew that request once it reached a global settlement with an ad hoc group of senior secured noteholders and the official creditors’ committee.
Catherine Jun:
Meanwhile, a shareholder and prepetition lender, Ascribe Capital, has opposed the settlement calling it a sub rosa plan. The hearing on the US trustee's motion is set for April 13. That's it for current news and notable stories. This is Sheppard Mullin's Restructure This. We'll see you next time.
Contact Information:
Kathryn Esaw’s bio: https://www.osler.com/en/team/kathryn-esaw
Susan Newell’s bio: https://www.osler.com/en/team/susan-newell
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